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Energy Summary for Oct. 23, 2014

2014-10-23 20:36 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for December delivery added $1.57 to $82.09 on the New York Merc (all figures in this para U.S.), after sources in Saudi Arabia told the media that the country supplied less oil to the market in September than in August. (This by itself does not indicate a production cut. Supply may differ from production based on the number of barrels going in and out of storage.) Brent for December added $2.12 to $86.83. Western Canadian Select traded at a discount of $15.40 to WTI ($65.12), unchanged. Natural gas for November lost 3.7 cents to $3.62. The TSX energy index added 5.92 points to close at 264.61.

Penn West Petroleum Ltd. (PWT) added 18 cents to $5.50 on 7.43 million shares, after signing an agreement to sell $355-million of non-core assets in Alberta. This brings it closer to its goal, announced last November, of selling $1.5-billion to $2-billion of assets before 2015. It has now sold just over $1.1-billion. As well, even though the latest assets being sold are producing 7,500 barrels of oil equivalent a day, Penn West did not cut its full-year production guidance of 101,000 to 106,000 barrels a day and in fact says it will be above the midpoint of this range, thanks to better-than-expected results in its core plays. Investors were not as impressed as Penn West might have hoped. Although the guidance reiteration is encouraging, the new asset sale was not going to affect full-year production anyway, because it will not close until early December. (The assets contributed to production from January through November, so losing them in December would mean an annualized hit of only a few hundred barrels a day.) Penn West also chose an odd way of breaking down the deal, describing the assets as weighted 80 per cent toward gas and natural gas liquids. Those two are not usually grouped like that because liquids are much higher margin. Penn West did not provide exact reserve figures either. It described the terms as "attractive," so the assets are probably gassy and the deal reasonable. Still, its phrasing is strange. There are two other things the market may be nervous about. The first is that the company still has not met its above-mentioned disposition target, and is running out of time to do so. Second, its 14-cent quarterly dividend recently crossed the 10-per-cent yield mark. Penn West previously cut this dividend from 27 cents on June 4, 2013, when the yield was 9.9 per cent.

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